Mortgage rates declined slightly despite bond market weakness

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Mortgage rates moved slightly below today, despite moderate weakness in the bond market. Generally, bond weakness leads to rate changes aboveceteris paribus. The most common reason for this kind of inconsistency can be summed up in one simple word: TIME.

The bond market moves throughout the day. However, mortgage lenders prefer to adjust rates only once every morning, although they will issue average daily rates if the bond market is volatile enough. In yesterday’s case, bonds improved throughout the day, but that was not enough for the average lender to issue an average daily revaluation. Even then, creditors not tend to miss all the improvements implied by bond market gains at once.

Bottom line: Lenders were still catching up with yesterday’s bond market strength by the time they needed to issue today’s first interest rate sheets. By the way, the shoe is now on the other foot. Bonds have lost enough positions this afternoon to suggest that mortgage rates should return to yesterday’s levels. Unless the bonds change much overnight, it should come as no surprise that the average lender’s interest rate will rise slightly by tomorrow morning.

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